(July 22) Moody’s downgrades Pennsylvania on pensions, budget

Moody’s Investors Service lowered Pennsylvania’s credit rating on $11.1 billion worth of bonds in part due to the recently passed state budget that it said relied too heavily on one-time money transfers and failed to address the pension crisis.

The rating for Pennsylvania’s general-obligation bonds was lowered to Aa3 from Aa2 in a move announced Monday that also included a downgrade by one notch on $2 billion in other bonds.

The ratings service called out the government officials for avoiding a “growing structural imbalance” that includes the $29.1 billion budget and what it said was a deteriorating fiscal condition due to gimmicks in the budget.

“The expectation that large and growing pension liabilities coupled with modest economic growth will limit Pennsylvania’s ability to regain structural balance in the near term,” Moody’s said.